WEBVTT - Guy on Twitter: PSUS, Left, ETFs 0:00:03.120 --> 0:00:09.920 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:11.440 --> 0:00:14.280 Hello and welcome to The Money Stuff Podcast, your weekly 0:00:14.360 --> 0:00:19.040 podcast where we talk about stuff related to money. I'm 0:00:19.040 --> 0:00:21.119 Matt Levian, and I write the Money Stuff column for 0:00:21.120 --> 0:00:22.000 Bloomberg Opinion. 0:00:22.239 --> 0:00:24.680 And I'm Katie Greifel, a reporter for Bloomberg News and 0:00:24.720 --> 0:00:26.160 an anchor for Bloomberg Television. 0:00:27.600 --> 0:00:29.000 Katie, we got some news this week. 0:00:29.080 --> 0:00:32.480 Oh, big time. We're going to talk about Bill Ackman obviously, 0:00:32.560 --> 0:00:35.440 we're going to talk about Andrew Left, which should be fun. 0:00:35.520 --> 0:00:38.000 And then we're going to talk about BONDI TFS which 0:00:38.400 --> 0:00:46.320 maybe will maybe we'll be fun. We'll find out where 0:00:46.360 --> 0:00:46.760 to start. 0:00:48.080 --> 0:00:48.239 Three. 0:00:48.360 --> 0:00:51.480 Oh my gosh. Yeah, So we went from twenty five 0:00:51.479 --> 0:00:54.120 billion dollars to two and a half to four billion 0:00:54.160 --> 0:00:56.640 dollars to two billion dollars. Now we're at I think 0:00:56.920 --> 0:00:57.760 zero dollars. 0:00:58.040 --> 0:00:59.640 There was kind of a pit's up at ten billion 0:00:59.680 --> 0:01:00.000 as well. 0:01:00.240 --> 0:01:01.639 I know I was in there somewhere. 0:01:01.880 --> 0:01:05.800 There was a hard gap at ten billion, which which 0:01:05.959 --> 0:01:07.160 they did not hit the hard gap. 0:01:07.319 --> 0:01:10.560 No, no, So I don't even know what to say. 0:01:10.600 --> 0:01:14.320 I mean, this was pretty spectacular to follow. We knew 0:01:14.319 --> 0:01:17.479 that he was road showing this ipo of a closed 0:01:17.560 --> 0:01:21.880 end funds Pershing Square USA exactly. He has a European 0:01:22.000 --> 0:01:25.240 version which trades at a big discount, which is a 0:01:25.280 --> 0:01:28.640 material part of this story, and it kept getting downsized 0:01:28.840 --> 0:01:33.840 and now it was pulled entirely. They're reevaluating it. And 0:01:33.920 --> 0:01:36.680 along that path we got a letter that was released 0:01:37.120 --> 0:01:40.880 which maybe Bi Lackman didn't know was going to be released, 0:01:40.959 --> 0:01:43.200 and then we had some investors bowing out as well. 0:01:43.280 --> 0:01:48.320 Right, So the story started with they're doing a road 0:01:48.320 --> 0:01:51.120 show for this IPO. There was talk of it being 0:01:51.200 --> 0:01:53.800 twenty five billion dollars, which would be a lot of 0:01:53.920 --> 0:01:56.520 money for a closed end fund, or just in general, 0:01:56.560 --> 0:01:59.240 it would be a very very very large IPEA. So 0:01:59.280 --> 0:02:02.200 he's got all these So he runs a hedgehund called 0:02:02.200 --> 0:02:04.840 Pushing Square. There's a management company that runs the hedge 0:02:04.840 --> 0:02:06.800 funds and that like collects the fees from the hedge 0:02:06.800 --> 0:02:10.440 funds and the clothes end funds. And he recently sold 0:02:10.600 --> 0:02:12.920 about a ten percents take in the management company to 0:02:13.440 --> 0:02:17.320 a few institutional and highnight Worth investors. And last week 0:02:17.360 --> 0:02:19.840 he sent a letter to those guys, those people who 0:02:19.919 --> 0:02:23.239 were investors in his management company saying essentially, hey, it 0:02:23.240 --> 0:02:25.120 would be really helpful if you would put in some 0:02:25.240 --> 0:02:28.840 orders in the Pushing Square USA Closed End Fund IPO. 0:02:29.040 --> 0:02:33.840 And I read that letter and it seemed to me 0:02:34.680 --> 0:02:37.760 that that's not a good sign. I probably underplayed this 0:02:37.840 --> 0:02:41.040 when I wrote about it, because there are other possible interpretations, right, 0:02:41.120 --> 0:02:44.200 Like one possible interpretation is that Bi Lackman is just 0:02:44.560 --> 0:02:47.520 unusually candid about how the IPO process works to his 0:02:47.919 --> 0:02:50.200 management company investors. But it sort of seemed like he 0:02:50.240 --> 0:02:51.600 was saying, hey, guys, it would really help out a 0:02:51.639 --> 0:02:53.840 lot if you could put it in order. Yeah. I 0:02:53.880 --> 0:02:56.640 used to be a capital markets banker and you would 0:02:56.680 --> 0:02:59.840 do a deal and you would get calls from investors. 0:03:00.000 --> 0:03:01.880 I would say, how's the deal going, And there's only 0:03:01.919 --> 0:03:03.440 one answer you can give them. You say, the deal 0:03:03.520 --> 0:03:07.040 is going great. There's so much demand. You really better 0:03:07.080 --> 0:03:09.320 put your order in because otherwise you're going to miss 0:03:09.320 --> 0:03:11.040 out because this deal is going so good, so many 0:03:11.080 --> 0:03:13.399 people wanted to buy it. You can't like necessarily lie 0:03:13.560 --> 0:03:15.960 if the dealer is going poorly, but you say things like, oh, 0:03:16.040 --> 0:03:17.640 there's a lot of interest, we're having a lot of meetings. 0:03:17.680 --> 0:03:19.560 That feedback is really good. You should put in your 0:03:19.639 --> 0:03:21.959 order quick, right, You try to create the sense of excitement. 0:03:22.440 --> 0:03:24.280 If the deal is not going well, then like you 0:03:24.360 --> 0:03:27.040 might call up your best friend investor and say, hey, 0:03:27.040 --> 0:03:28.320 it would really help out if you would put in 0:03:28.320 --> 0:03:30.640 a big order, because that would get us over the line, 0:03:30.680 --> 0:03:34.000 that would create some momentum. And it sort of seemed 0:03:34.040 --> 0:03:36.480 like that was what Acman was doing by sending this 0:03:36.560 --> 0:03:39.160 letter to the people who are already in his management company. 0:03:40.160 --> 0:03:43.160 Problem is, if you do that publicly, everyone can read it, 0:03:43.480 --> 0:03:46.840 and no, that's a bad sign. So I do think that, 0:03:46.960 --> 0:03:50.240 like the letter did not necessarily help very much, because 0:03:50.280 --> 0:03:52.880 I do think that some people read it and think, well, 0:03:53.360 --> 0:03:55.080 this suggests that there's not a ton of demand. 0:03:55.360 --> 0:03:57.280 Yeah, and I was just going to bring up bow 0:03:57.360 --> 0:04:00.360 Post because you did name a few investors in that 0:04:00.680 --> 0:04:02.720 letter to investors saying hey, it would help if you 0:04:02.760 --> 0:04:06.200 could invest more. He mentioned that baal Post Capital had 0:04:06.320 --> 0:04:08.960 previously committed to investing one hundred and fifty million dollars, 0:04:08.960 --> 0:04:13.480 and then Bloomberg News broke the news that actually they 0:04:13.520 --> 0:04:19.800 were pulling out. There weren't reasons given, but reportedly he 0:04:19.839 --> 0:04:20.760 didn't like being named. 0:04:21.360 --> 0:04:23.760 Yeah, I mean, no one wants to be named as 0:04:23.800 --> 0:04:26.080 the endorser for a deal unless I've sort of explicitly 0:04:26.120 --> 0:04:28.080 agreed to that. I think the Bloomberg story suggested that 0:04:28.120 --> 0:04:31.800 there's some political seth Klerman as a Democrat and Bill 0:04:31.880 --> 0:04:34.760 Lackman has become like a very vocal Trump supporter. But 0:04:34.920 --> 0:04:36.880 I don't know. I think that either of those are 0:04:36.960 --> 0:04:40.240 possible explanations. But like, here's another explanation. If you interpreted 0:04:40.240 --> 0:04:42.240 that letter to mean there's not a ton of demand, 0:04:42.600 --> 0:04:45.080 then even if you were already in the book, you 0:04:45.120 --> 0:04:47.120 would take your order out of the book, right, yeah, 0:04:47.240 --> 0:04:49.039 Because this is the problem with this thing is like 0:04:49.320 --> 0:04:53.400 you can be a long term investor, right you can 0:04:53.440 --> 0:04:55.200 say I like Bill Lackman. I think that he's going 0:04:55.240 --> 0:04:57.240 to compound my money at a high rate, and so 0:04:57.279 --> 0:05:00.760 I want to be invested in his fund and I'll invest, 0:05:00.920 --> 0:05:03.680 you know, this month and hold it for ten years 0:05:03.760 --> 0:05:05.839 and expect Bill Ackman to compound my money for me. 0:05:07.040 --> 0:05:11.520 But the problem is that on the first day of trading, 0:05:11.600 --> 0:05:13.240 this thing is either going to trade up or it's 0:05:13.240 --> 0:05:16.520 going to trade down. And as you said, his existing 0:05:16.640 --> 0:05:18.880 clothes unfund trades at a big discount to its net 0:05:18.920 --> 0:05:22.400 ASSEID value. Most closed un funds traded discounts to their 0:05:22.440 --> 0:05:26.720 net asset value. And so if you're an investor, instead 0:05:26.760 --> 0:05:29.279 of buying the shares at fifty dollars in the IPO, 0:05:29.440 --> 0:05:31.520 you might say, well, I'll just wait until the next 0:05:31.600 --> 0:05:33.600 day and I'll buy them at a discount. I'll buy 0:05:33.600 --> 0:05:36.160 them at like forty five or whatever. So it would 0:05:36.160 --> 0:05:37.920 be sort of silly to buy on the IPO if 0:05:37.960 --> 0:05:41.200 you could wait to buy at a discount. The whole 0:05:41.200 --> 0:05:43.680 point in the IPO process is for Bill Ackman to 0:05:43.760 --> 0:05:45.680 tell people, no, no, it's going to trade it at 0:05:45.680 --> 0:05:47.599 a premium, right, and so he makes that case in 0:05:47.640 --> 0:05:49.480 this letter, but he sent these investors and that was 0:05:49.520 --> 0:05:51.920 then made public sort of by accident. He makes the 0:05:51.960 --> 0:05:53.520 case that is going to trade at a premium. You know. 0:05:53.680 --> 0:05:56.720 The essential case is that a lot of retail investors, 0:05:56.960 --> 0:05:59.520 for one reason or another, aren't going to get shares 0:05:59.520 --> 0:06:01.479 in the IPA. Like the main one is that most 0:06:01.800 --> 0:06:04.839 retail investors, most retail brokerages aren't going to get allocated 0:06:04.920 --> 0:06:07.960 anything in the IPO. Also, there are some European retail 0:06:07.960 --> 0:06:10.320 investors who would want to buy shares, but who can't 0:06:10.320 --> 0:06:12.880 buy them in the IPM. So all these retail investors 0:06:13.080 --> 0:06:15.960 want to buy shares in the bill Ackman IPO. They 0:06:16.000 --> 0:06:17.960 can't buy it at the time of the IPO, so 0:06:18.000 --> 0:06:20.080 they'll buy it the next day in the aftermarket, and 0:06:20.120 --> 0:06:22.480 there'll be so much retail demand and maybe so much 0:06:22.480 --> 0:06:25.000 institutional demand that the IPA will trade up. And so 0:06:25.160 --> 0:06:27.039 if you wait to buy in the aftermarket, you'll have 0:06:27.040 --> 0:06:29.360 to pay fifty five dollars a share instead of fifty 0:06:29.400 --> 0:06:32.760 dollars a share. But the IPO was so big that 0:06:33.680 --> 0:06:35.880 the really essential question is is there going to be 0:06:36.000 --> 0:06:39.120 enough institutional demand in the aftermarket? Is there going to 0:06:39.120 --> 0:06:42.000 be institutional demand the next day? And they were just 0:06:42.120 --> 0:06:45.200 kept being indications that there was just not enough institutional 0:06:45.200 --> 0:06:49.440 demand to like price a really tight large IPO. And 0:06:49.520 --> 0:06:53.040 so if you thought that there wasn't that much institutional demand, 0:06:53.040 --> 0:06:54.640 then you'd say, well, it'll trade down to forty five 0:06:54.640 --> 0:06:56.320 and I'll wait until the buy it the next day, 0:06:56.520 --> 0:06:58.640 and then there will be no institutional demand. Right, if 0:06:58.680 --> 0:07:00.400 everyone's going to wait to buy it, then no one 0:07:00.400 --> 0:07:01.440 will buy it in the idea. 0:07:01.520 --> 0:07:04.080 Well, two points on that, the first one being this 0:07:04.240 --> 0:07:07.440 statement that they put out. Did acknowledge that they said 0:07:07.440 --> 0:07:08.479 that this question. 0:07:08.560 --> 0:07:09.240 That's the whole thing. 0:07:09.400 --> 0:07:12.640 Yeah, basically would investors be better served waiting to invest 0:07:12.680 --> 0:07:15.840 in the aftermarket than the IPO. Yes, it sounds like. 0:07:15.880 --> 0:07:17.280 I mean if you just look at the history of 0:07:17.280 --> 0:07:21.680 closed don funds. Also to the point of retail demand, 0:07:21.760 --> 0:07:25.920 I mean, Bill Lackman has a million something followers on Twitter, 0:07:25.920 --> 0:07:28.560 which is a lot. That's a huge audience, but it 0:07:28.720 --> 0:07:33.320 seems quite tricky to turn followers into investors. That's not 0:07:33.840 --> 0:07:36.720 necessarily guaranteed. And you think about the following that he 0:07:36.800 --> 0:07:41.080 has on Twitter, I would imagine that the majority of 0:07:41.120 --> 0:07:44.720 those people, or at least a sizeable portion, aren't necessarily 0:07:44.800 --> 0:07:46.880 following him for his investing acumen. 0:07:49.240 --> 0:07:51.360 I mean, I hear you, right. I mean he's courting 0:07:51.400 --> 0:07:54.600 controversy and a lot of Twitter opinions and not mainly 0:07:54.680 --> 0:07:56.360 tweeting about. Part of that, by the way, is like 0:07:56.920 --> 0:07:59.360 he has said that he wants to be able to 0:07:59.360 --> 0:08:02.520 tweet more about investing, and because of the legal structures 0:08:02.520 --> 0:08:04.720 that he currently operates, and he can't just go have 0:08:04.840 --> 0:08:07.760 his tock pics on Twitter, and once he launches Pershing 0:08:07.760 --> 0:08:10.120 Square USA, he can. But yeah, I hear you right, 0:08:10.160 --> 0:08:12.680 I mean, like his Twitter following is not purely about investing. 0:08:13.000 --> 0:08:15.280 What I am wondering is what this means for the 0:08:15.360 --> 0:08:19.480 overall Pershing Square IPO, because he did sell that ten 0:08:19.520 --> 0:08:23.920 percent steak for a billion dollars, just over a billion dollars. 0:08:23.960 --> 0:08:27.600 And I mean they've said that the success of this 0:08:28.240 --> 0:08:31.800 pie Sus IPO is very important to the eventual IPO 0:08:32.280 --> 0:08:33.240 of Pershing Square. 0:08:33.520 --> 0:08:35.600 Oh yeah, I mean he sold a ten percent stake 0:08:35.600 --> 0:08:37.600 in the management company. The management company is just like 0:08:37.840 --> 0:08:40.040 the thing that collects fees from the funds that he 0:08:40.120 --> 0:08:42.320 runs right right now, he runs about eighteen billion dollars 0:08:42.360 --> 0:08:44.760 worth of funds, and they sold the stake in the 0:08:44.800 --> 0:08:47.600 management company at a ten billion dollar valuation. It's sort 0:08:47.600 --> 0:08:50.840 of crazy to imagine that the entity that collects fees 0:08:50.960 --> 0:08:53.800 on eighteen billion dollars worth of funds is worth ten 0:08:53.840 --> 0:08:56.480 billion dollars, right. That can't be right, right? That implies 0:08:56.520 --> 0:08:58.520 that he would take like half of the value from 0:08:58.559 --> 0:09:01.280 like his investors' funds for himself or for his investors. Now, 0:09:01.640 --> 0:09:03.080 the only way you can get to a ten billion 0:09:03.120 --> 0:09:05.880 dollar valuation for the management company is if you think 0:09:05.960 --> 0:09:09.960 that the management company is very soon going to manage 0:09:09.960 --> 0:09:13.400 a lot more money. And I think obviously the case 0:09:13.520 --> 0:09:16.880 that was made to these management company investors, is we 0:09:17.040 --> 0:09:21.079 are going to transform from a smallish hedge fundition manager 0:09:21.120 --> 0:09:25.079 to a sort of more institutional asset manager that attracts 0:09:25.080 --> 0:09:27.719 a lot of retail interest and a lot of institutional 0:09:27.760 --> 0:09:30.719 interest and runs tens of billions of dollars and has 0:09:30.760 --> 0:09:33.760 a publicly traded permanent capital vehicle, and has like the 0:09:33.920 --> 0:09:38.079 steady stream of large earnings from running large amounts of money. 0:09:38.480 --> 0:09:40.680 And then, you know, I think if you were investing 0:09:40.720 --> 0:09:44.280 in the measurment company, somewhere in your mind was the 0:09:44.280 --> 0:09:47.280 notion of a twenty five billion dollar pieces IPO and 0:09:47.320 --> 0:09:50.840 a zero dollar pieces ipo makes that case more challenging. 0:09:51.080 --> 0:09:52.520 The other thing I want to say about the management 0:09:52.520 --> 0:09:56.240 company is so I wrote on Thursday about the problem here, 0:09:56.240 --> 0:10:00.199 which is that it's very hard to sell the these 0:10:00.200 --> 0:10:03.120 shares at nav because you expect to close on fund 0:10:03.160 --> 0:10:06.240 to trade at a discount. Everyone wants a discount. Well, 0:10:06.840 --> 0:10:08.840 how do you sell the shares at a discount? Because 0:10:09.080 --> 0:10:10.840 the shares are just it's a pot of money, right, 0:10:10.880 --> 0:10:13.400 So you can't sell you know, one hundred dollars worth 0:10:13.440 --> 0:10:14.839 of money at ninety dollars because then you only have 0:10:14.920 --> 0:10:18.040 ninety dollars. So how do you create a discount? And 0:10:18.080 --> 0:10:20.559 I wrote about some possible ways to do that, which 0:10:21.240 --> 0:10:23.880 come down to kind of Pershing Square putting in some money. 0:10:24.320 --> 0:10:26.840 But several readers emailed me immediately to be like, well, 0:10:26.840 --> 0:10:28.760 here's the obvious way to do it. The obvious way 0:10:28.800 --> 0:10:31.240 to do it is to put some of the management 0:10:31.240 --> 0:10:34.520 company into pieces. So instead of really, I've been seating 0:10:34.559 --> 0:10:36.760 the fund with like a billion dollars of his own 0:10:36.800 --> 0:10:40.200 money for free, he could see it with ten percent 0:10:40.240 --> 0:10:43.640 of Pershing Square the management company, for free, and then 0:10:44.080 --> 0:10:47.680 pieces would have a net asset value more than just 0:10:47.720 --> 0:10:51.360 the cash that investors put in. And then the investors say, okay, 0:10:51.360 --> 0:10:53.040 I'm getting a discount and they put in their money. 0:10:53.440 --> 0:10:56.880 And this is a good idea. And you know, someone 0:10:56.960 --> 0:11:00.480 drew the analogy to like Vanguard, where Vanguard invest do 0:11:00.600 --> 0:11:02.400 own a piece of the management company. It's because it's 0:11:02.400 --> 0:11:05.800 a mutual company. But the problem here is you sort 0:11:05.800 --> 0:11:08.200 of already promised the management company in an IPO to 0:11:08.240 --> 0:11:10.199 these other investors, right, so to say we're going to 0:11:10.320 --> 0:11:13.200 push the management company into pieces is a little bit 0:11:13.200 --> 0:11:16.600 more challenging. So what does it mean for the for 0:11:16.640 --> 0:11:18.760 the IPO added, It's like a setback, right, I mean 0:11:18.800 --> 0:11:23.400 the IPO was I think premised on the Pieces IPO 0:11:23.480 --> 0:11:26.320 going really well, and with having a hard time raising 0:11:26.360 --> 0:11:30.640 money for Pieces, it's harder to get to a ten 0:11:30.679 --> 0:11:32.600 billion dollar valuation for the management company. 0:11:32.720 --> 0:11:35.280 There's also the question of why does he want to 0:11:35.280 --> 0:11:37.560 be public, Like why does he want to take the 0:11:37.640 --> 0:11:41.760 overall hedge fund company public? I mean, there aren't many 0:11:41.840 --> 0:11:45.560 of them. The obvious example is the Sculptor Rhythm thing, 0:11:45.679 --> 0:11:48.079 which didn't exactly turn out well, which also had Bill 0:11:48.160 --> 0:11:49.000 Lackman involvement. 0:11:49.280 --> 0:11:51.559 Yeah, minor involvement. Yeah, I don't know. You know, the 0:11:51.840 --> 0:11:54.600 reason for launching the Clothes End Fund is quite straightforward, right, 0:11:54.600 --> 0:11:56.720 I mean, you have permanent capitical vehicle. You get to 0:11:56.720 --> 0:11:58.679 go on TV and tweet your stock picks and then 0:11:58.679 --> 0:12:01.000 hopefully you can create some momentum in your stocks. 0:12:01.080 --> 0:12:04.560 I mean, he could just launch an ETF. I'll just 0:12:04.600 --> 0:12:07.960 say it. I know, I know, permanent capital. That's very exciting. 0:12:08.440 --> 0:12:12.959 I still don't quite understand clothes and funds. I get 0:12:13.000 --> 0:12:15.680 it from the manager's point of view, permanent capital that 0:12:15.760 --> 0:12:18.160 seems really great, But from the investor point of view, 0:12:18.440 --> 0:12:20.560 I don't know why you would do that. 0:12:20.720 --> 0:12:22.200 No, I think he can make a good case for 0:12:22.280 --> 0:12:27.000 that here because he is not possibly like takeover inclined investor. 0:12:27.720 --> 0:12:30.439 Then knowing how much money you have for the long 0:12:30.559 --> 0:12:32.680 term is actually really important, right. I mean, if you 0:12:32.679 --> 0:12:35.839 have an ETF and they're withdrawals and you still have 0:12:35.960 --> 0:12:38.240 of your positions, right. That is easy to do if 0:12:38.280 --> 0:12:40.480 you are just the index one, right, But it's harder 0:12:40.520 --> 0:12:42.960 to do if you are doing the kinds of trades 0:12:42.960 --> 0:12:45.880 that b. Lackmann wants to do, which are like these 0:12:45.920 --> 0:12:48.720 like long term fundamental equity and trades, but also like 0:12:49.040 --> 0:12:50.840 you know, derivative trades. I mean, like some of their 0:12:50.920 --> 0:12:54.240 track record is from CDX beats going into COVID, and 0:12:54.280 --> 0:12:56.600 again that's harder to do if your capital can vanish 0:12:56.640 --> 0:12:59.439 every night. So I think that from his perspective, it's 0:12:59.440 --> 0:13:02.000 obviously to permanent capital, and I think he can make 0:13:02.000 --> 0:13:05.240 the case to investors that actually, like permanent capital is 0:13:05.240 --> 0:13:07.839 the way that I create value and ETF doesn't make 0:13:07.880 --> 0:13:09.640 sense for the kind of investing that I do. I 0:13:09.679 --> 0:13:10.720 think that's a reasonable case. 0:13:11.080 --> 0:13:11.520 Yeah. 0:13:11.559 --> 0:13:13.280 So the question of why does he want to take 0:13:13.320 --> 0:13:15.040 the management company public? I don't know. I mean, some 0:13:15.080 --> 0:13:17.560 of it is like I think anyone else, like, you know, 0:13:17.600 --> 0:13:20.440 you want some legacy, right. I mean there's this perception 0:13:20.520 --> 0:13:23.959 that with like the sort of famous Hedgehund managers of 0:13:24.280 --> 0:13:27.400 like Acman's vintage, Like, there's a perception that the management 0:13:27.440 --> 0:13:30.240 company is like that one guy. And I think that 0:13:30.280 --> 0:13:32.000 they would like to have a proof of concept that 0:13:32.000 --> 0:13:35.679 actually it's an institution and really the investing team has 0:13:35.760 --> 0:13:37.840 kind of transitioned away from him and it's not just him, 0:13:38.440 --> 0:13:42.719 and it's a permanent entity that will exist forever and 0:13:43.120 --> 0:13:45.760 provide wealth for him forever, right, instead of like when 0:13:45.800 --> 0:13:48.200 he quits, the thing vanishes. So I think there's a 0:13:48.240 --> 0:13:50.960 temptation for anyone who runs a company to take that 0:13:50.960 --> 0:13:54.000 company public so you can you know, take money off 0:13:54.080 --> 0:13:56.679 the table and have permanent shares instead of just like 0:13:56.800 --> 0:13:59.120 your own labor. But right, the track record of it 0:13:59.160 --> 0:13:59.920 is kind of challenging. 0:14:00.280 --> 0:14:02.960 Yeah, well let's see if pieces gets off the ground 0:14:03.000 --> 0:14:06.400 when it comes to the eventual pershing square IPO. Apparently 0:14:06.760 --> 0:14:10.960 he's already thought of how to make this structure work. 0:14:11.000 --> 0:14:13.520 That was also in the press release that don't. 0:14:13.280 --> 0:14:16.320 Get excited, yeah, excited to see like next week's piece 0:14:16.360 --> 0:14:19.240 of structure. I think putting part of the management company 0:14:19.240 --> 0:14:21.400 into it, putting some cash into it that doesn't come 0:14:21.400 --> 0:14:25.480 from investors or or possibilities. Yeah, like I you know, 0:14:25.480 --> 0:14:29.360 I wrote it like SPACs do kind of provide the 0:14:29.400 --> 0:14:32.680 technology for this, right, like get spack. At a very 0:14:32.760 --> 0:14:35.480 high level, is a sponsor puts in some money to 0:14:35.520 --> 0:14:38.560 pay the startup costs. Then the sponsor kind of sells 0:14:38.560 --> 0:14:41.840 shares at net asset value to investors, and then if 0:14:41.840 --> 0:14:44.080 the sponsor does a good job and finds a good deal, 0:14:44.480 --> 0:14:47.680 the sponsor gets a lot of like free upside. So 0:14:47.720 --> 0:14:51.760 there's this like Carter, where like if the thing is 0:14:51.840 --> 0:14:55.920 those kind of met the shareholders get all their money back, 0:14:56.000 --> 0:15:00.440 so they are protected against the problems of investing at 0:15:00.560 --> 0:15:02.840 nav and then having the navy go down. If the 0:15:02.880 --> 0:15:07.480 thing does poorly, then the manager the sponsor eats the loss, 0:15:07.760 --> 0:15:10.560 and if the thing does really really well, the shareholders 0:15:10.960 --> 0:15:12.520 give up some of the upside and it goes to 0:15:12.560 --> 0:15:14.200 the sponsor. And so the sponsor has the sort of 0:15:14.240 --> 0:15:16.920 asymmetric trade where the sponsor puts in some money that's 0:15:16.920 --> 0:15:18.800 at risk, but then if it does really well, the 0:15:18.800 --> 0:15:20.720 sponsor makes a lot of money. You can imagine a 0:15:20.760 --> 0:15:24.360 structure like that for pieces, where you know, Bill Ackman 0:15:24.400 --> 0:15:28.560 seeds it with money, and if it trades below net 0:15:28.600 --> 0:15:31.200 asset value, he kind of bears the first loss so 0:15:31.240 --> 0:15:33.400 that the investors who buy in the IPO still get 0:15:33.480 --> 0:15:35.400 at least the amount of money they put in. And 0:15:35.440 --> 0:15:37.360 then if the thing does really well, he gets warrants 0:15:37.440 --> 0:15:40.440 or something so that he gets upside to compensate him 0:15:40.480 --> 0:15:42.640 for that. Like, that's a structure that could work. You 0:15:42.640 --> 0:15:44.720 could do something like that. That's easy enough. 0:15:44.880 --> 0:15:45.960 That's some good ideas here. 0:15:46.200 --> 0:15:48.240 Part of he wants to, you know, quit podcast and 0:15:48.280 --> 0:15:51.600 then go structure pieces mark two. But most of me, 0:15:51.640 --> 0:15:59.920 it doesn't. Most of me just wants the podcast about it. 0:16:07.640 --> 0:16:08.400 Andrew left. 0:16:08.760 --> 0:16:11.520 Andrew left, So this story broke. I think it was 0:16:11.560 --> 0:16:13.560 on Friday, that's right, because. 0:16:13.320 --> 0:16:15.280 I wrote on Friday and then I published on Saturday, 0:16:15.320 --> 0:16:17.520 because I didn't hit the send button on my email. 0:16:17.720 --> 0:16:22.640 It's really I that just made mistake. 0:16:22.680 --> 0:16:26.200 There, amateurs the column on Friday on the web and 0:16:26.240 --> 0:16:31.080 the terminal, and then I didn't hit send on the email, 0:16:31.160 --> 0:16:34.440 and no one told me until I told my wife 0:16:34.480 --> 0:16:36.320 I published the column. She's like, I didn't get it. 0:16:37.040 --> 0:16:39.240 I feel like there's some arbitrage to do there. 0:16:39.360 --> 0:16:41.480 If you had the inside information about my column, you 0:16:41.480 --> 0:16:43.760 could have traded Andrew Left features a day early. I 0:16:43.760 --> 0:16:44.080 don't know. 0:16:44.480 --> 0:16:47.040 I bring that up the timeline because it feels crazy 0:16:47.040 --> 0:16:48.680 that we haven't talked about this yet. 0:16:48.880 --> 0:16:50.360 Yeah, we just missed it last week. 0:16:50.600 --> 0:16:52.200 So set the scene for us. Set the table. 0:16:52.520 --> 0:16:56.760 So Andrew Left is a guy on Twitter. There's a 0:16:56.800 --> 0:16:59.360 lot of people like this who are activist short sellers. 0:16:59.440 --> 0:17:01.720 So what he does is he finds companies that he 0:17:01.760 --> 0:17:05.840 thinks are bad, sometimes on valuation, often because he thinks 0:17:05.880 --> 0:17:10.040 they're frauds, and he shorts their stock and then he 0:17:10.119 --> 0:17:14.040 publishes angry reports saying what a fraud they are, and 0:17:14.080 --> 0:17:17.160 then he tweets those reports and then their stock goes down, 0:17:17.880 --> 0:17:19.800 and that's how he makes money. A lot of these 0:17:19.840 --> 0:17:23.080 people are guys on Twitter who may or may not 0:17:23.400 --> 0:17:26.040 have something like a hedge fund or something called a 0:17:26.080 --> 0:17:28.800 hedge fund. But when Andrew Left got in trouble last 0:17:28.800 --> 0:17:31.399 week the SEC, one of its complaints about him was 0:17:31.400 --> 0:17:33.160 that he wasn't really running a hedge fund. He didn't 0:17:33.160 --> 0:17:35.679 know outside money. He was just a guy investing his 0:17:35.720 --> 0:17:39.560 personal account. I assume a lot of activists shorts are 0:17:39.840 --> 0:17:42.600 just guys investing their personal accounts, but it just sounds nicer. 0:17:42.640 --> 0:17:45.480 So Andrew Left is Andrew Left. But he's also Sitron Research, 0:17:45.600 --> 0:17:48.240 which just sounds fancier than just being a guy on Twitter. 0:17:48.560 --> 0:17:50.600 And honestly, I think he's kind of earned it, Like 0:17:50.640 --> 0:17:54.399 he's had a good track record of spotting frauds. You know, 0:17:54.440 --> 0:17:58.440 he really was instrumental in spotting big problems at Valiant 0:17:58.440 --> 0:18:01.320 Pharmaceuticals a few years ago in a way that really 0:18:01.320 --> 0:18:03.520 took billions of dollars off that market cap and was 0:18:04.240 --> 0:18:07.200 good investigative work. And he has a good track record 0:18:07.240 --> 0:18:09.640 of finding companies that will go down. So that's his deal. 0:18:09.680 --> 0:18:12.160 And last Friday, the SEC and the Department of Justice 0:18:12.200 --> 0:18:16.879 brought charges against him for doing alleged fraud. And basically 0:18:16.920 --> 0:18:19.239 they're accusing him of doing a reverse pupping dump. Right 0:18:19.280 --> 0:18:21.399 instead of like saying hey you should buy the stock 0:18:21.880 --> 0:18:24.040 and then selling it, he said hey, you should short 0:18:24.040 --> 0:18:26.280 the stock, and then he bought it. So their accusation 0:18:26.359 --> 0:18:28.560 is that he would short these stocks, he would publish 0:18:28.760 --> 0:18:31.919 angry reports calling them frauds, and then kind of the 0:18:31.960 --> 0:18:34.520 minute he published the stock would go down and he 0:18:34.560 --> 0:18:37.879 would buy back the stock. So five minutes or an 0:18:37.880 --> 0:18:40.480 hour a day after he published his report, he was 0:18:40.480 --> 0:18:42.280 no longer short, so he took all the risk off 0:18:42.280 --> 0:18:46.840 the table. And the SEC one I think, just doesn't 0:18:46.920 --> 0:18:50.840 like that because it just seems like, if you're doing 0:18:50.920 --> 0:18:53.720 it that way, you don't really think the stock is 0:18:53.720 --> 0:18:55.400 a fraud. You just want to move the stock down 0:18:55.480 --> 0:18:57.359 so you can make money, and you don't care what 0:18:57.400 --> 0:19:00.159 happens after that. I don't think that's right. I think 0:19:00.200 --> 0:19:02.280 the SEC is wrong about that. I think that Andrew 0:19:02.320 --> 0:19:04.959 Left has a lot of incentive to care about what 0:19:05.000 --> 0:19:08.879 happens after that first day because this is his livelihood, 0:19:09.240 --> 0:19:14.240 and if he's always wrong, the stocks will stop going 0:19:14.280 --> 0:19:16.520 down and this will stop working. The only way this 0:19:16.640 --> 0:19:19.080